Govt opens tender of 10 oil, gas blocks

Govt opens tender of 10 oil, gas blocks

Fitri Wulandari, Jakarta

The tender process officially began on Monday for 10 oil and
gas block acreages, and offer a better production split and
incentives for investors.

Iin Arifin Takhyan, director general of oil and gas at the
Ministry of Energy and Mineral Resources, said the incentives and
higher production split were aimed at luring investors.

The 10 oil and gas acreages being offered are the Lhokseumawe
block in Aceh province, Ujung Kulon in Banten, East Java's
Northeast Madura III, Northeast Madura IV, Northeast Madura V,
East Nusa Tenggara Rote I, Rote II, Maluku's Babar and Selaru,
and Manokwari in Papua province.

Interested investors can obtain bidding information starting
from July 6. Bidding documents must be submitted by Sept. 30.

Bid winners will be announced in October, followed by the
signing of contracts.

Iin said that major oil and gas investors such as U.S.
ExxonMobil Oil Indonesia and PT Caltex Pacific Indonesia had
shown interest in three of the blocks, namely Northeast Madura
III, IV and V.

"The Java area is considered a hot spot because there are more
new oil and gas findings," Iin said.

The government is offering a higher production split of 35
percent for oil and 40 percent for natural gas for the following
blocks: Rote I and II, Babar, Selaru and Manokwari. The
government is offering a higher split because these acreages are
located in remote areas.

"This is a very generous offer," Iin said.

Investors normally get a 15 percent revenue split from oil
investment, and 30 percent from gas.

The government is also offering fiscal incentive for the
development of the Lhokseumawe, Ujung Kulon, Rote I and II,
Babar, Selaru and Manokwari blocks.

Iin did not provide details on this, only saying that the
incentive was aimed at luring investment in developing gas fields
amid high demand for natural gas.

Bidding for the 10 blocks was supposed to start last year, but
the government delayed it as the Ministry of Finance wanted to
impose value-added tax on the importation of equipment used in
oil and gas exploration.

The Ministry of Mineral Resources and Energy has said that the
tax plan was opposed by oil and gas companies as it would
increase the cost of exploration work while there was no
guarantee the results would be successful.

The companies currently pay the tax only after commercial
production.

Iin said his office was continuing talks with the Ministry of
Finance, but it would not hamper the tender of the oil and gas
blocks.

The government will open a second round of bidding for another
10 oil and gas blocks later this year.

Indonesia has been struggling to boost investment in the oil
and gas sector, chiefly to lift sagging oil production.

Current oil production reaches 1.072 million barrels per day,
including condensate which is lower than the output quota set by
the Organization of Exporting Petroleum Countries (OPEC).

Indonesia is the only Southeast Asian country that is a member
of OPEC.